Thinking about investing in residential solar panels? You should. Installing solar panels on your home increase its property value, boosts resale appeal, and dramatically reduces your utility bill. Along with the continually falling costs of the system itself, there are a number of energy tax credits that will help return the maximum amount of your investment in the shortest amount of time. The types and amount of incentives available to you may depend on your location and the year in which you purchase your solar panels, so let’s take a look at what you need to know to get the greatest tax credit.
Federal Solar Tax Credit
The first and probably most important tax credit to register for is the Solar Investment Tax Credit (ITC). This federal policy is a 30 percent tax credit for solar systems on residential properties. You can apply this credit to you personal income taxes when you purchase a solar system and have it installed on your home. In other words, it’s a dollar-for-dollar reduction in the income taxes that you’d otherwise pay the federal government! Originally scheduled to expire in 2015, the ITC has been extended through 2023.
“The ITC has proven to be one of the most important federal policy mechanisms to incentivize the deployment of both rooftop and utility-scale solar energy in the United States. As a result of the multi-year extension of the credit enacted in late-2015, solar prices are expected to continue to fall while installation rates and technological efficiencies will continue to climb,” according to the Solar Energy Industries Association.
This policy keeps money in your pocket that you’d usually be paying in income taxes, making up for the up-front costs of the solar system!
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State Solar Tax Credits
In addition to the federal solar tax credit, which applies to everyone in the U.S., there are state-specific tax credits that you may qualify for. This credit is used in a similar way as the federal credit, but applies to your state tax bills. The amount of the tax credit varies per state, and they do not reduce the amount of your federal tax credits; meaning you can combine the savings! So in a state like Arizona, which has a 25% solar energy credit, you can combine that with the 30% federal credit, resulting in up to a 55% tax credit. The Database of State Incentives for Renewables & Efficiency (DSIRE) has a comprehensive list of solar incentives by state.
Some of the best state-based solar tax credits exist in:
Along with being a sound investment, solar panels help to greatly reduce your household’s dependence on fossil fuel energy and carbon footprint. There are a variety of different purchasing options and its important to conduct proper research and choose the option that is best suited for you. You can also return to our blog for information on residential solar panels, and to receive free quotes from local installers in your area.